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EMC bosses see Amazon as the real threat

Despite all the established and emerging storage startups on the scene, EMC’s top executives say cloud giant Amazon is the competitor that worries them the most.

At the UBS Global Technology Conference this week, EMC executive vice president Jeremy Burton was asked about EMC CEO Joe Tucci’s recent comment to a market research analyst that he was more concerned about Amazon than other competitors.

Burton said Tucci’s answer had as much to do with the lack of challenges from traditional competitors than Amazon’s strength, but admitted Amazon’s cloud is taking business from EMC.

“If I look at our traditional competitors, I would argue that they’ve never been weaker for a variety of reasons,” said Burton, who heads EMC marketing and product operations. “But Amazon is a beast you know a lot less about. They’ve got a different approach. They are soaking up a lot of the spend in what we traditionally have called shadow IT. So they are building a beachhead in an area where typically we’ve not frequented. We know that they’ve got technology and I think that’s a combination you always take very, very seriously.”

Burton said he did not agree with those who claim a handful of “mega clouds” will dominate IT. He said regulatory and privacy issues will prevent that, as well as the need for traditional IT infrastructures. He said a well-run private cloud with a similar architecture can be cheaper than going to Amazon.

Burton said Amazon’s numbers show that only around 10% of Amazon Web Services (AWS) revenue is going to the enterprise, and likened Amazon’s threat level to that of a fast-growing startup.

“So I don’t subscribe to the view that world domination and the end is near, but they are a competitor that we take seriously,” Burton said.

Burton downplayed any price advantage Amazon has, saying “we don’t put out press releases when we reduce prices and they do. Over the last five years the storage industry in general has reduced prices roughly about 21 percent annually” while Amazon has reduced prices around 14% to 19%.

What Amazon has going for it, he says, is “they have made it easy and IT typically has not been easy to deal with. And so the opportunity for the vendors – EMC being one – is for us to provide something that is as easy to consume as an AWS S3 service.”

He said EMC’s “Project Nile” is a step in that direction.

As for the traditional storage competition, Burton said IBM, Hewlett-Packard, Dell and NetApp are all weaker than they were five years ago. When asked about promising startups, he said few of them have the breadth to take on a company the size of EMC. He said of about 80 startups on EMC’s radar over the last six or seven years, 10 went out of business, 26 were acquired and two went public.

“And I think the two that went public probably wish they had been acquired,” he said, an apparent slap at Fusion-io and Violin Memory. The shares of both of those flash vendors are trading at far below their IPO prices.

“A lot of these [startups] solved a certain part of the problem. The exit for them is to build a revenue stream, solve a small part of the problem and then look to be acquired,” Burton said. “That’s been the history of the storage industry … If they do their job right, they will become a feature in a bigger company’s portfolio.”

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